The body of a murdered Rotorua woman was found with ears severed, one ear placed in the victim's mouth, multiple stabs wounds and bound in a plastic bag under piles of rubbish and dirt off an isolated forestry road, a court has heard.

In Rotorua District Court today Gwenda Sloane, 44, pleaded guilty to the murder of Michelle Hoffmann-Tamm, 51, on November 7.

The two women had been in a casual sexual relationship for a year and had been drinking heavily at Sloane's bedsitter in the city when an argument occurred after Sloane alleged Hoffmann-Tamm had stolen $20 from her wallet, said Sergeant Bill Scott, reading from the summary of facts.

A police search was undertaken after Hoffmann-Tamm disappeared on November 7 when she left her home on her red bike to visit a friend.

Her body was found a fortnight later on November 23 after Sloane was questioned and led police to it in forestry near Murupara.

Sloane told police the pair had met up on the night of Hoffmann-Tamm's disappearance after Sloane had texted the victim to join her "for some fun".

They bought three dozen beers and went back to Sloane's house to drink.

During the night Sloane became enraged and "lost it" when she thought Hoffmann-Tamm had stolen $20 from her wallet.

She grabbed two knives and stabbed the victim 35 times in the chest and back, cutting her throat from the side of the mouth to her ear.

She severed both of the victim's ears, stuffing one ear in the victim's mouth, and the other in the rubbish bag she later put the body into to dispose in the forest.

Sloane then went to sleep and left the body lying on the kitchen floor for a day.

The next day she put the body in the boot of her car and drove 120 kilometres heading first towards Te Teko in the eastern Bay of Plenty before taking a side road through forest towards Murupara where she found a forestry road.

She dumped the body in a ditch off the road, covering it in more rubbish and dirt and returned home to clean her house.

Police spoke to Sloane twice during the search for Hoffmann-Tamm.

On November 22 she admitted assaulting the victim and led police to the body.

The body was so well concealed it would not have been found unless Sloane had showed police where it was buried, Sergeant Scott said.